Duel Of The Spice Giants

April 06, 1995|By Kim Clark | Kim Clark,Sun Staff Writer

Burns, Philp & Co., the Australian food conglomerate that has adopted many of McCormick & Co.'s strategies to become a spice powerhouse in its own right, appears to be following McCormick's lead once again.

Four months after McCormick announced it would restructure, close plants and cut its work force by 600 workers in order to remain the lowest-cost spice producer, Sydney-based Burns is expected to announce today that it, too, will close plants and restructure.

The aim? "Our goal, globally, is to be the lowest-cost producer" of spices, said Burns spokeswoman Ann McDonald in Sydney.

She said Burns plans to close all but one of the plants belonging to the three U.S. spice companies it has bought since 1988.

Burns took a $40 million write-off in its second quarter, which ended Dec. 31, to pay for the pending restructuring, but Ms. McDonald said officials are now deciding which plants to close.

At risk: a Durkee French plant in Bethlehem, Pa., a Durkee French plant in Quebec and a Spice Islands plant in Sparks, Nev.

Analysts are betting that the survivor will be a Tone Brothers Inc. plant in Iowa, a comparatively new plant that boasts state-of-the art freeze-drying machines.

Ms. McDonald said that Burns isn't following a me-too strategy but wants to become known for having the highest quality and most natural spices. In Europe, for example, she said, its operations use steam instead of chemicals to sterilize spices.

But analysts note that the Australian company, which also owns the Fleischman's yeast brand, has often followed in the footsteps of McCormick, which is the world's biggest spice maker.

For example, Burns first entered the spice business in 1988 by buying the San Francisco-based Spice Islands brand after McCormick's takeover bid was killed by federal antitrust regulators.

Four years later, Burns became the United States' second-biggest spice company, with about 15 percent of the U.S. market, by buying the Durkee French brand. McCormick holds about 40 percent of the U.S. spice market.

In 1993, Burns again followed McCormick's lead, buying Germany's largest spice maker, Karl Ostmann Gmbh, after German antitrust regulators scotched a takeover effort mounted jointly by McCormick and CPC International.

And in February, Burns pushed beyond the retail spice business and into another of McCormick's big markets -- food service supply -- by buying Tone Brothers Inc., a major spice supplier to restaurants and wholesalers.

In the last two years, Burns has engaged McCormick in a "heated duel" for acquisitions and customers, said Richard Beaurepaire, who follows Burns' stock for Bain Securities in Sydney.

Both companies are racing to buy up small spice competitors around the world, hoping to lock up market share and consolidate their operations, he said.

Burns has grown from nothing to about 10 percent of the world spice market in seven years mostly by acquisition, he noted. And McCormick, with about 20 percent of the world market, is also gobbling up spice makers to maintain its lead. The Sparks-based company spent $82 million to buy seven food and seasoning companies last year alone. And, in the United States, the two companies have started a bidding war for exclusive space on supermarket shelves, he said.

Now, the duel has extended from competitors and customers to cost-cutting, he said. The new competition is forcing McCormick to push ahead, launching a nationwide advertising campaign and branching into other types of food products in the United States, said company President H. Eugene Blattman.

McCormick will keep its significant lead because of its careful development of spice growers, and its construction of plants in China, Mr. Blattman told stockholders at McCormick's annual meeting.

"The potential in Asia-Pacific alone is so great that it could fuel growth for the entire company for well into and possibly to the end of the next century," he said.

And despite McCormick's recent layoffs, he insisted that the company's much-vaunted corporate culture will enable the company to win the contest.

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